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Dan Barnes - Information Corporation

Finextra and Oracle have gathered together some of the industry's top thought leaders to assess the key trends and issues within transaction banking, regulations and retail banking. This group will analyse the latest news on upcoming regulations, new service offerings and industry issues shaping the new financial services landscape with regular blog posts, video interviews, webcasts debates and surveys.

Trade finance creates a 10 billion dollar risk

11 June 2014 | 1788 views | 0

BNP Paribas is in a real fix. It faces censure for allegedly being found guilty of breaching US rules on money laundering, and of breaching US sanctions, between 2002 and 2009. These alleged breaches relate to Cuba, Iran and Sudan. The risks involved for
the bank are potentially terminal; the fine it is threatened with – rumoured to be around US$10 billion – would wipe out expansion plans and if regulators make it plead guilty to a crime, as they recently did with Credit Suisse, then it could be barred from
making settlements in dollars which could lead to a major loss of international business.

Q: How did a trade finance unit cause this kerfuffle?

A: Allegedly it disguised trades made in dollars with Cuba, Iran and Sudan, countries against which the US had sanctions. And you thought trading was risky.

Q: What stage is the investigation at?

A: The bank and prosecutors are in negotiations. Apparently they are not going well for the bank. News reports say that several offers – including a guilty plea by the Swiss-based trade finance subsidiary – have been rejected.

Q: Where has the US$10 billion fine idea come from?

A: Nowhere official, but reading between the lines in the Financial Times reports, one can see that journalists have been briefed by people on both sides of the discussion. The rumoured size of the fine is alleged to be a consequence of prosecutors feeling
that they have not been fully assisted by the bank.

Q: Wasn’t Iran effectively cut off from the banking world by interbank payments network, SWIFT?

A: Well, 30 banks were cut off in 2012, but the European Union ruled several of the barrings were illegal and unblocked them in 2013. There are about 30 banks of note in Iran. And that was all after the period in which allegations against BNP Paribas stand.

Q: Do banks ever get their licences revoked for misleading the public or bringing down the economy?

A: No. Bank of America faces a US$12 billion fine to resolve an investigation that is mis-sold mortgage-backed securities, according to the Wall Street Journal, however there is no reports of a guilty plea or a threat to its licence.

Q: So bad news all round?

A: Hardly – buy shares in US banks! They might have been fined more heavily than overseas banks, but they are immune from their own prosecutors’ worst threats, unlike many of the biggest banks in Europe – HSBC, Credit Suisse, Standard Chartered and now BNP
Paribas.